Parts of Wales ‘missing out on millions’ by not using powers to raise tax on second homes

Benllech on Anglesey, where the tax has been raised. Picture by Joe Hayhurst (CC BY 2.0)

Some of Wales’ biggest councils – including Cardiff, Vale of Glamorgan and Carmarthenshire – are missing out on millions of pounds a year by failing to use powers to raise council tax on second homes, research has revealed.

Since a change to the law in 2014, councils have had the power to raise council tax by up to 100% on empty properties and second homes.

But research from the Welsh language society, Cymdeithas yr Iaith, shows that only nine local authorities have decided to use the powers, raising over £20 million for public services as a result.

Pembrokeshire Council is the local authority that has benefited most from the policy taking in £5.8 million over three years. Powys and Ynys Môn has collected over £4 million each, with Gwynedd Council receiving £2.2 million in higher tax receipts in a single year and Flintshire over £1.3 million.

Eight councils said they hadn’t used the powers at all – Carmarthenshire, the Vale of Glamorgan, Caerffili, Penybont, Rhondda Cynon Taf, Torfaen, Newport and Neath Port Talbot.

Cardiff Council has imposed a council tax premium on long term empty properties this year, but not on second homes. The language campaigners didn’t receive a response from four local authorities.

 

‘Resources’

Responding to the news, Robat Idris from language campaign group Cymdeithas yr Iaith said the figures were surprising.

“Some of them are missing out on millions of pounds they could be investing in council housing or schools,” he said.

“Cymdeithas campaigned for these tax powers for councils as a way of tackling the problem of second homes, which are serious in terms of the sustainability of communities, services and the Welsh language.

“But also, this higher council tax is a way of ensuring that more resources are available to invest in local communities and services.

“It’s encouraging to see a number of councils have benefited from Cymdeithas’ campaign to secure the tax powers. We’re aware that in Gwynedd the local authority in investing the extra receipts in housing for local young people – and they deserve plaudits for that.

“Second homes are part of a wider problem about how society looks at housing. Instead of thinking about houses as speculative assets, having somewhere to live should be a basic human right.

“The Welsh Government should consider further ways of addressing the problems – for example, they should look at the examples in Cornwall of restrictions placed on the proportion of homes in a community that can be second homes.”

He said Cymdeithas yr Iaith were now campaigning for councils to be able to raise taxes on tourism.

“In a number of parts of the country it needs to be recognised that tourism has an impact on the community, it’s only right therefore that local people have a chance to raise money to invest in local infrastructure and services,” Robat Idris said.

“These tourism taxes are commonplace around the world.”

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J E MarsdenRhys GRhosdduHuw DaviesJonathan Gammond Recent comment authors
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Ian Williams
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Ian Williams

Many get round this charge by registering as a business and often obtain tax relief by claiming to operate under rules covering furnished holiday accommodation letting. Now a business, exempt from council tax and able to claim relevant expenses against letting income, including mortgage/caravan finance interest. Doubling council tax will make no difference.

Rhys G
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Rhys G

I live in bro cymru and own a second home in my village. There seems to be a popular misconception that turning your second home into a business is simple. The process to register as a business is not an easy one. I had to provide proof that I was advertising my property and that I had actually rented it out for at least 70 days a year. I also had to provide my accounts for the previous 4 years to prove it was a going concern. I now have to pay the council separately for waste collection. In my… Read more »

A Prophecy is Buried in Eglwyseg
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A Prophecy is Buried in Eglwyseg

The wolves are the problem, not the wool they seek. 60 years ago Sir Drefaldwyn fell. Now Ynys Môn has fallen.

When we’re lions, and hold Conwy, the darkness we push back over the Berwyn in dawn’s light. The dragon will sleep always unless Trefynwy’s walls echo with Welsh.

Huw Davies
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Huw Davies

Party in power needs to show leadership by developing new regulations that reduce the scope for tax avoidance in this and other devolved subject areas. If the party in power is disinclined to do so then opposition parties need to design a solution and include it in their next manifesto. Anyone not interested in sorting this problem is not concerned about the reduction in resources available to local authorities and the collection of taxes.

Peter Meazey
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Peter Meazey

The problem here is local authorities not applying the existing rules. When will Labour politicians finally wake up and get off their backsides ?

Huw Davies
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Huw Davies

As I understand it there is no legal obligation in place, that it’s just a piecemeal “optional” affair. Authorities that are unwilling to tackle the second homes issues are thus able to avoid any confrontation. If there was a centrally legislated piece of regulation, such as there is with RentSmart Wales, this would make each authority address the situation on its patch.

Jonathon Gammond
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Jonathon Gammond

Tourism taxes are decided at a local level in France and the system seems to work well. I expect there are some kind of bands within which the tax can be levied and there are different rates depending on the type of accomodation. The money goes to local councils. The tax is seen as a contribution by visitors to local funds and is not designed to be at a level to change behaviour.

David Roberts
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David Roberts

Should be 500% with NO get out clauses!!

Steve Duggan
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Steve Duggan

There is no real surprise here – people with money have been coming across the border for years and buying second homes here -which are normally left empty for half of the year – and not paying their due for the privilege. In the 60s some were burnt down, we shouldn’t be doing that now, obviously, but we should definetely make them contribute to the community. There is also a correlation between many of the areas where second homes are bought, such as the Vale of Glamorgan and Pembrokeshire, and Tory seats. Money votes Tory and everyone else gets poorer.… Read more »

Meurig williams
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Meurig williams

The policy of punitive second home taxation in Wales is incompatible with an open economy. Even if it seems like an easy win to capture extra income for local authorities, it sends a signal of hostility to inward investors generally. These buyers are committing their capital to Wales and are committing to generating revenue for the local economy. Punitive taxation will influence them to by-pass Wales. You may argue , who cares? But then don’t wonder why Wales is continually overlooked by overseas high net worth and corporate investors. Dont wonder why the Welsh diaspora feels none of the pull… Read more »

Jonathan Gammond
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Jonathan Gammond

There is a difference between taxing people’s first homes and second homes. There is a difference between expecting everyone to pay their fair share towards local services and allowing a minority to benefit from loopholes that confuse tourist accommodation and second homes. When local.people are priced out of the market by “outside investors” then the housing market is dysfunctional and becomes discredited. Overall we need to broaden the base for paying for local services through local sales taxes, digital economy taxes and wealth taxes and reduce business rates, council tax and income tax to encourage people to be economically active… Read more »

Rhosddu
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Rhosddu

You’re talking as if second homes were some kind of blessing to Cymru.

J E Marsden
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J E Marsden

There should be a contribution from tourists to our roads, amenities and local infrastructure. Tourism whilst providing some seasonal work also has a cost.